Finland: Proposed new regulation on peer-to-peer loans and housing loans to consumers

A working group set up by the Ministry of Justice proposes new regulation on peer-to-peer loans and housing loans to consumers.

The proposal included in the working group report dated 16 November 2015, together with the legislative proposal prepared by the Ministry of Finance regarding the peer-to-peer lending to companies and equity based crowdfunding, will soon close the legislative gap regarding these new forms of funding.

We welcome the clarification of the various open issues. The proposed legislation takes into account the generally relatively small size of peer-to-peer intermediaries by restricting the regulatory requirements to a low level, while simultaneously providing protection to investors and borrowers.

Same rules for peer-to-peer loans as for consumer credit

The proposal covers peer-to-peer loans intermediated to consumers, when the creditor is not a professional creditor. The working group proposes that intermediating peer-to-peer loans to consumers would require registration of the intermediary with the Regional State Administrative Agency of Southern Finland. The conditions for acceptance of the registration would be the credibility of the intermediary, its employees' knowledge of and experience in credit activity, its ability to ensure sufficient protection of personal data, and its capability of safekeeping customer funds.

According to the proposal, peer-to-peer loans would be paralleled to consumer credit. The intermediary would be responsible for ensuring that the minimum requirements of the law are met. These requirements include, among others, providing the consumers with sufficient information relating to the loan, evaluation of the creditworthiness of the consumer prior to entering into the loan agreement and ensuring that the interest does not exceed the interest rate cap set by law.

The proposal includes new regulation on the implementation of the directive regarding credit agreements for consumers relating to residential immovable property. The provisions concern all loans granted to consumers that relate to residential immovable property (housing loans). The new provisions regarding housing loans would be included in the Consumer Protection Act and many provisions currently concerning credit institutions would be extended to all providers of housing loans. Several proposed amendments would cover all consumer credit.

Additional protection to consumers would be introduced by prohibiting the change of the interest rate on consumer credit due to increased costs, restricting the possibility of raising the amount of costs collected from consumers to actual costs incurred by the lender, prohibiting tie-in selling of credit, extending the 14 day cancellation right of a consumer to housing loans, and allowing the consumer to convert a foreign currency loan to euros at his request.

A new requirement would also be the obligation of housing loan intermediaries to register with the Regional State Administrative Agency of Southern Finland.

The proposals regarding peer-to-peer loans to consumers and restrictions on the increase of housing loan interest are national and they are not based on the directive.

New legislation based on the proposal is anticipated to enter into force during the first half of 2016.